Oil Risk Exposure: The Case of the U.S. Oil and Gas Sector

Mohanty, Sunil; Nandha, Mohan Singh

doi:10.1111/j.1540-6288.2010.00295.x

Cited by 106 publications

(88 citation statements)

References 64 publications

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“…Sadorsky (2001) and Boyer and Filion (2007) find a positive significant relationship between oil price shocks stocks returns for Canadian oil and gas companies, El-Sharif et al (2005) report the same result for UK oil and gas companies as does Mohanty and Nandha (2011) for US oil and gas companies. Dayanandan and Donker (2011) report that oil price increases have a positive and statistically significant impact on the accounting profits of oil and gas companies in North America.…”

Section: Literature Reviewmentioning

confidence: 83%

Oil Price Shocks and Volatility in Australian Stock Returns

Ratti

Hasan

2013

Economic Record

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This paper examines the effect of oil shocks on return and volatility in the sectors of Australian stock market and finds significant effects for most sectors. For the overall market index, an increase in oil price return significantly reduces return, and an increase in oil price return volatility significantly reduces volatility. An advantage of looking at sector returns rather than a general index of stock returns is that sectors may well differ markedly in how they respond to oil price shocks. The energy and material sectors (as expected) and the financial sector (surprisingly) are out of step (in different ways) with results for the other sectors and for the overall index. A rise in oil price increases returns in the energy and material sectors and an increase in oil price return volatility reduces stock return volatility in the financial sector. Explanation for the negative (positive) association between oil return (oil return volatility) and returns (volatility of returns) in the financial sector must be based on the association via lending to and/or holdings of corporate bonds issued by firms with significant exposure to oil price fluctuations and their speculative positions in oil related instruments.JEL Classifications: G12, G15, Q4

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Section: Literature Reviewmentioning

confidence: 83%

Oil Price Shocks and Volatility in Australian Stock Returns

Ratti

Hasan

2013

Economic Record

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“…Several other studies have found the expected positive relationship between oil prices and the stock market returns of oil and gas companies [8] [9]. There is further evidence of variation in returns across industry subsectors [8], although some early studies found no significant effects [10] [11].…”

Section: Literature Reviewmentioning

confidence: 90%

“…However, studies rarely assessed the impact at the sector or sub-sector level, though Mohanty and Nandha [8] and Hommoudeh and Li [7], are exceptions. Moreover, those who look at individual firms or sectors focus almost exclusively on the oil-producing sector 2 .…”

Section: Literature Reviewmentioning

confidence: 99%

Revisiting the Effect of Crude Oil Price Movements on US Stock Market Returns and Volatility

Sonenshine¹,

Cauvel²

2017

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From mid-2014 to 2016, oil prices plunged rapidly causing significant volatility in the US and global equity markets. This change in crude oil prices occurred after a significant run up in oil prices three to four years earlier. Each change in the growth trajectory of oil prices affects stock market returns. How and why do oil price shocks affect the expected stock market returns among key sectors of the economy? This paper explores this issue by examining how the magnitude of crude oil price changes affects the stock market returns and variances of key producing, banking and consuming segments of the US economy. Our findings provide some explanations for the asymmetric responses to positive and negative oil shocks found in these key sectors of the economy.

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“…Fourthly, there is no clear evidence that using book to market ratio can be a successful strategy in the oil and gas sector. Fifthly, the formation of portfolios based on momentum will not be a useful strategy in the oil and gas Faff and Brailsford (1999), Nandha (2011) andBroadstock et al (2016).…”

Section: Resultsmentioning

confidence: 99%

“…Contrary to the findings of Faff and Brailsford (1999), Mohanty et al (2010) found no significant relationship between oil prices and stock returns over the period of the study between 1998 and 2010. Mohanty and Nandha (2011) estimated the oil price risk exposure of the US oil and gas sector using Fama-French-Carhart's four factor asset pricing model. The model was expanded by an additional risk factor of the monthly changes in oil price using West Texas Intermediate (WTI).…”

Section: Review Of Literaturementioning

confidence: 99%